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Four Drivers of Change: Business Trends Driving Innovation

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The future of business is being shaped by four new facts of modern life that are visible all around us, yet many people don’t register them as the game changers they are.

Made possible by digital technologies and social media, each is significant on its own, but they are rarely considered as a group. In combination, they are powering innovation in nearly every sector: lowering barriers to entry, unlocking opportunities for new ways of doing business, and increasing the likelihood of new competition—and business model disruption—for incumbents.

Andrew Blau

“Certainly, there is no lack of information on trends that are shaping the marketplace,” says Andrew Blau, an Advisory managing director at Deloitte & Touche LLP. “But viewing these trends and the strategic risks they create as part of a larger pattern can help organizations develop more powerful insights about the threats not just to day-to-day operations, but those even more dangerous threats that can disrupt an organization’s ability to compete,” Mr. Blau adds.

While these four new features of the world show up in very different ways, what connects them is that each makes what was once difficult, expensive or complex now relatively easy, cheap and simple.

Driver #1: Coordination has never been easier

Getting more than just a few people to coordinate their actions used to be hard, but now there are hundreds of applications that enable even far-flung individuals to work together. Social media has infiltrated our daily lives, crowd-sourcing and task matching platforms are in increasingly common use, and applications designed for group work and improving communication and coordination globally are widely available. When coordination gets easier, organizations can form without traditional obstacles, creating new business models in the process. Teams can be built around a shared purpose, drawing the right talent from a global pool rather than being limited by only the talent that is locally available.

Driver #2: Managing money has never been easier

Aggregating, organizing, moving and exchanging money has all gotten much easier due to high speed networks and digital technologies. The result is tremendous power and freedom for handling money, accessible by individuals, groups, and organizations, even those with little access to traditional banking infrastructure. Applications can now provide small businesses and individuals the ability to collect multiple forms of payment, settle accounts, and send money across great distances, at a fraction of the cost and inconvenience of similar transactions 10 years ago.

Driver #3: Making has never been easier

Making things—from small batch prototypes to mass production of complex objects—has already gone through a sea change in ease and sophistication. And access to increasingly sophisticated machinery for making ever more complex products is seemingly everywhere. Going beyond physical products and services, software, networks, and digital platforms help entrepreneurs create and commercialize new digital products and services that not long ago would have been impractical or even impossible to create in most organizations, much less by solo developers or small teams.

Driver #4: Learning has never been easier

The ability for anyone who wants to discover new things, learn new skills, or track events in real time has been transformed. The capacity to access and discover information from peers, standing bodies of knowledge and observations of what is happening as it happens is fundamentally new, especially at the scale we see it now. Furthermore, the access to learning is often free, whether through videos that can help people learn new things, or online courses from some of the world’s foremost universities.

The Three Vs: Volume, Variety and Velocity

These four drivers are today’s new normal, and nothing seems likely to slow their growth or reach, much less reverse them. The consequences could play out for a generation or more.

“What’s important to watch is what happens when essential tasks that every organization has to handle get much easier,” says Mr. Blau. “Tapping talent and collaborating over long distances has been simplified, and complex products can be created with a small fraction of the investment that used to be needed. All of this is aided by the relative ease of with which we can move and manage money,” he adds.

As a result, there’s more of the three Vs of new business formation—volume, variety and velocity—and they are only expected to increase. According to Mr. Blau, “we are already seeing that the number of start-ups around the world is growing, and the rate at which new entrants are coming to market is increasing.” The traditional business models that were defined by limitations in coordination and access to technology, knowledge and capital are no longer the only viable options. New technology-enabled businesses are free to experiment with structures that are smaller, nimbler and cheaper to operate.

It is no surprise, then, that new types of organizations are emerging—organizations that are established not over multiple generations, but that can emerge and grow to dominance within a decade or less. As new companies develop at exponential rates, long-established organizations are stumbling at an increasing pace when faced with disruption. In short, a new generation of businesses is forming around these trends.

Managing Strategic Risks That Come with Change

As organizations consider the four drivers, the changes already seen in business and society, and the changes that are yet to come, they may be asking how can they respond to changes and events that are uncertain, have no historical precedent and leave an organization vulnerable to strategic risks that threaten to disrupt the assumptions at the very core of the business model.

Although it is impossible to know the future, it’s clear that past decision-making practices cannot simply be retrofitted to a new set of problems. From a risk management standpoint, strategic risks pose challenges because of their complexities and potentially high stakes. Therefore, new approaches to manage those strategic risks are needed.

As organizations develop systems to deal with unexpected change, including those that could threaten their business models, it’s important such systems encompass people, processes and capabilities to:

—Accelerate discovery: The option to remain on autopilot after deciding on a strategy is no longer sustainable. Instead, organizations should institute mechanisms that accelerate discovery at a pace that can keep track of surprises and revisit strategies if they are no longer valid.

—Scan ruthlessly: Identifying sources of risks is the first step to preventing surprises. The next step is to continuously track those risks as they develop. Leveraging expert partners for trend analysis and future scanning can surface subtle indicators of change that could add up over time to produce a tipping point.

—Confront biases: What was experienced in the past will not likely repeat itself. It is necessary to challenge our understanding of the operating environment in order to embrace necessary change that can initially be disorienting and uncomfortable.

—Prepare for surprise: After understanding an organization’s potential risks, it is important to rehearse readiness. Decisive action in the face of ambiguity is one of the greatest challenges of leadership. Establishing thresholds and courses of action in various futures can help to prepare for an uncertain one.

“Strategic risks can destroy huge amounts of value very quickly, and they can threaten the existence of the institution or entire lines of business,” says Mr. Blau. “Identifying these potential risks early can only be to an organization’s advantage. Those companies that are best prepared will be the ones that consider the changes happening now and systematically explore not only the business model risks they pose, but also the opportunities they present,” he adds.

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